Monday, July 21, 2008

The locusts are back: US Private equity makes $7.7 billion bid for TransAlta


Is there a Finance Minister in the house?

First it was BCE, as Canada's largest public telco. Then it was TransAlta Power Now it's the mother ship TransAlta Corp., as Canada's largest public electric producer. BCE's LBO will result in the loss of $800 million a year in annual taxes. What do you suppose the LBO of TransAlta Power and now TransAlta Corp. will cost?

Perhaps someone should ask Jim Flaherty.....he presumably is opposed to tax leakage. Or was that just a grand ruse, to put these companies into the hands of private equity and out of the hands of broad Canadian ownership?

LS Power, Global Infrastructure Bid for TransAlta

By Jim Polson and Ian McKinnon

July 21 (Bloomberg) -- LS Power Equity Partners and Global Infrastructure Partners offered to buy TransAlta Corp., Canada's largest publicly traded electricity producer, for about C$7.75 billion ($7.72 billion) to tap growing energy demand in Alberta.

The bid is for C$39 a share in cash, 21 percent higher than TransAlta's last closing price, LS and Global said today in a filing with the U.S. Securities and Exchange Commission. The acquisition would take TransAlta private and leave its headquarters in Calgary.

LS, the U.S. power-plant developer allied with Dynegy Inc., owns about 9 percent of TransAlta's stock, according to the filing. TransAlta has posted four straight years of free cash flow exceeding C$200 million, according to data compiled by Bloomberg, as oil-sands developments in northern Alberta and population growth stoke power use in the province.

``This is about control over free cash flow,'' said Daniel Shteyn, an analyst at Desjardins Securities Inc. in Montreal who rates TransAlta shares ``buy'' and owns none. ``Management will have to be wooed.''

TransAlta said in a statement that it will review the proposal to discuss a buyout, made in a letter received after the close of trading on July 18, and ``respond in due course.'' The company has been selling overseas assets to focus on Canada and the U.S. The suitors said they want Chief Executive Officer Steve Snyder to stay on.

Shares Rise

TransAlta rose C$4.20, or 13 percent, to C$36.45 at 10:25 a.m. in Toronto Stock Exchange trading. The stock climbed 4.6 percent on July 18, its biggest gain since April 10, after dropping to its lowest close in 16 weeks the day before.

New York-based Global is a $5.64 billion fund led by former Credit Suisse Group executives. Credit Suisse would provide $2 billion of financing, and the suitors said they would invest $6 billion in TransAlta.

``The company is in great markets and has a good portfolio of assets,'' James Bartlett, president of LS Power Equity Advisors LLC, said today in a telephone interview. ``We view this as a separate, stand-alone investment with our partners.''

TransAlta's holdings include coal-, hydroelectric and wind- driven generators in Alberta. The province's electricity demand may rise 3 percent annually, double Canada's average, according to the provincial agency that oversees Alberta's power industry.

Conflict Over Buybacks

Luminus Management LLC, a hedge-fund operator, and LS recommended in January that TransAlta sell power plants in Mexico and Australia to help fund stock buybacks. Luminus previously called for TransAlta to increase debt and buy back shares rather than invest in new generation capacity.

Luminus and LS withdrew their slate of director nominees in March, after TransAlta sold Mexican assets and increased dividends. Bartlett said that Luminus, which he called a ``related company,'' isn't party to the acquisition proposal.

Private ownership will allow CEO Snyder and other managers to concentrate on long-term strategies and operations, rather than quarterly profit reports, Bartlett said.

TransAlta spokesman Michael Lawrence said the July 18 letter was ``a non-binding and highly conditional invitation to discuss a potential transaction.'' The company appointed a special committee of independent directors to review the letter and make recommendations, he said.

To contact the reporters on this story: Jim Polson in New York at jpolson@bloomberg.net; Ian McKinnon in Calgary at imckinnon1@bloomberg.net.

4 comments:

Dr Mike said...

Jimmy Jimmy Jimmy , wherefore art thou Jimmy.

The cupboard is being ransacked & you are going on your merry little way appearing as happy as all get out.

You squeaked about tax leakage & how a bunch of greedy old farts were ripping off the Canadian public & causing tax leakage.

Yet you do nothing when the dollars are disappearing faster than a kid at bathtime.

As credit becomes more available once more , the tax dollars will be lost at an incredible rate as more of our companies & trusts are gobbled-up by private money.

Yet Jimmy you do not seem to care--you must have an alternate plan in the works as you did in Ontario when a deficit was looming----look for something to sell.

I do know it won`t be your soul , that went to the devil a long time ago.

Dr Mike Popovich

Anonymous said...

Flaherty will get you nowhere; he acts as though he's as happy as a pig in shit, and grins and flits about like a leprecaun with a bag of gold, all the while the economy is folding on all sides. What a charlatan he is!

Paul Sirois

Anonymous said...

March 7, 2007:

"What is the Canadian Government's stance on the scenario of US private money crossing the boarder and purchasing undervalued assets such as Telus.?" "How will you approach the scenario of US ownership, profit moving south and debt left in Canada?"



Ablonczy replied that she was not aware on anybody buying Telus and that the questioner was "fear mongering". "Nobody buys into that argument" she clearly stated. “I think it’s an alarmist’s view of what will happen” she concluded

GL

nineofiveland said...

The Spectrum Auction should just about cover the tax lost to Canadian taxpayers .. no wait .. that's just a one time intake .. the no tax from BCE et al goes on forever.

What fools they are .. Harper, Flaherty, Carney and company.

We wil never forget the Income Trust betrayal.